The House of Representatives just passed not one, not two, but three different bills that would expand the definition of “accredited investor.” Does this mean the definition will change? No. The three proposed changes are: Include in the definition of accredited investor anyone who says he or she understands the risks, using a form of not more than two pages issued by the SEC. This would effectively eliminate the concept of accredited investor. Include in the definition of accredited investor anyone who has received personalized advice from a person who has himself or herself become an accred ..read more

Form C is the disclosure document used in Reg CF. Because I see so many Form Cs that aren’t done properly, I thought it would be worthwhile to explain how a Form C should be drafted and why too many lawyers go astray. Rule 201 (17 CFR §227.201) tells us exactly what should be disclosed in a Form C: Rule 201(a) calls for the name, legal status, physical address, and website of the issuer. Rule 201(b) calls for the names and business experience of officers and directors.  Rule 201(c) calls for the name of each person owning 20% or more of the voting stock. All the way through Rule 201(z ..read more

I spend lots of time talking about special purpose vehicles (SPVs) and the Investment Company Act of 1940. Now we have a real-world example. Anthropic was founded by Dario Amodei, who wrote the basic artificial intelligence model for OpenAI before leaving to start his own company. Once ChatGPT launched Anthropic has had no trouble raising money. They’ve raised $7.5 billion and counting in the last year. In my humble opinion, the amount of money being thrown at Anthropic is insane. Most obviously, it demonstrates the psychological power of The Fear of Missing Out. More subtly, it represents the ..read more

It’s a trick question. It’s a trick question because the term “blind pool offering” doesn’t appear in Reg CF. If you try to figure out whether Reg CF allows “blind pool offerings” you’ll drive yourself crazy and/or reach the wrong answer.  To illustrate the point, suppose NewCo was formed to buy Class B multi-family projects in the southeastern United States but has not yet identified any such properties. If you focus on the term “blind pool offering” you might decide that NewCo can’t use Reg CF. But if you read Reg CF instead, you’ll reach the opposite – and correct – conclusion.  T ..read more

Beginning on January 1, 2024, new and existing companies, with some exceptions, must disclose their owners to the US Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”). This is big news in the legal world, not just for Crowdfunding but for everyone. The following summary was prepared by Chimuanya Osuoha. If you’re a client of our firm you’ve probably dealt with Chimuanya and know her to be an extremely capable young lawyer. The Corporate Transparency Act  General Rule Beginning January 1, 2024, all entities that are either formed or registered to do business in the ..read more

Like everyone else, I was shocked by the launch of ChatGPT. And like everyone else, I believed lawyers would be first on the chopping block. But I now have a far more optimistic view. I think AI will have a far more nuanced and ultimately beneficial effect for lawyers and their clients, including but not limited to Crowdfunding clients. At first, I thought lawyers (or non-lawyers, gasp!) could type a question into ChatGPT and get a fully-formed legal product, whether a brief, a memo, a contract, or an obnoxious letter. But it turned out that neither ChatGPT nor its imitators is close to that ..read more

My 10th-great grandfather was William Bradford, the leader of the Pilgrims. I’m grateful that he and his band of religious refugees made the trip and were saved from starvation by the native population. I’m grateful for the wisdom of the American people and the resilience of their institutions. I’m thankful for a culture that rewards risk-taking and innovation and that is slowly, haltingly, inexorably freeing itself of the prejudices of our collective past. I’m grateful for American entrepreneurs who endlessly question the present and invent the future. I’m grateful I declined an invitation t ..read more

Reg CF requires financial statements. To refresh your memory: Those thresholds are based on the maximum you’re trying to raise. So if your “target amount” is $600,000 but you’re trying to raise up to $900,000, and this is your second Reg CF offering, you need audited statements.  Now suppose you conducted your business as a sole proprietorship or an LLC until six months ago, when someone in Silicon Valley told you to convert to a C corporation. Your sole proprietorship or your LLC is a “predecessor” of your C corporation within the meaning of 17 CFR §230.405. Hence, under the Reg CF rule ..read more

During my lifetime we’ve never seen political dysfunction like the dysfunction we’re seeing among House Republicans. Coming just as American leadership could be most helpful, the dysfunction is dangerous, a national embarrassment, all that and much more. Yet it might prove good for Crowdfunding. An ally of Representative Kevin McCarthy, Representative Patrick T. McHenry of North Carolina was designated “interim Speaker” when McCarthy was dethroned. Nobody knows what “interim Speaker” means or what he or she can do, but now, with Republicans unable to agree on an actual Speaker and no other way ..read more

Last year the SEC proposed new rules for private fund advisers. After public comment the SEC just adopted final rules. Some of the new rules apply only to investment advisers required to be registered with the SEC. Others apply to all investment advisers, including so-called “private fund advisers.” I’m going to focus on the latter set of rules. NOTE:  The new rules apply more broadly than you might think: EXAMPLE:  Nikki Chilandra forms an LLC of which she is the sole manager, raises money from her private network of investors (no more than 100), and uses the money to buy a limited ..read more